The USDA mortgage loan program is one of the best-kept secrets in the home buying market today. This zero-down, 100 percent financing home loan is sponsored by the United States Department of Agriculture to promote homeownership in less-dense communities across the U.S. Often known as the USDA Rural Development Loan (RD Loan) or Rural Housing Loan, the program is part of the larger Rural Housing Service under USDA’s umbrella of programs.
But don’t let the name fool you. It’s not just for properties that are far-removed from civilization. In fact, a full 97 percent of U.S. land mass is eligible for USDA financing, representing 109 million people — about one-third of the U.S. population. It’s very likely that a property near you qualifies. Getting a USDA loan program is not much different than getting a Conventional Fixed Mortgage.
Advantages of a USDA Mortgage Loan
Your community bank can handle 100 percent of the transaction. That means your community banker does everything from taking your application to issuing the final approval. USDA puts a final stamp of approval on the loan, and even that is handled by the community bank.
USDA guaranteed loans aren’t right for every buyer. But, any first-time or repeat buyer looking for homes outside of major cities should check their eligibility for the program.
Here are a few advantages USDA guaranteed loans:
- 30 year fixed rate
- No down payment required
- No cash reserves needed
- Closing cost may be financed on some transactions
- Seller contributions allowed
- Competitive low rates
- Property location and income limit may apply
Advantages of a Conventional Fixed Loan
A Fixed Conventional Loan would require down payments, the buyer is required to hold cash reserves and closing costs.
If you want to buy a home close to the downtown core of a major city, USDA is not right for you. Additionally, if you have a high income for your area, or 20 percent down available, you will not qualify for USDA. The USDA loan is reserved for those who need it most.
If you can’t meet the USDA requirements, a Conventional Fixed Loan is still a good deal. The biggest advantage of any fixed-rate mortgage loan – whether USDA or Conventional – is that the interest rate is locked in for the term of the loan. If interest rates rise — or even double or triple — you still reap the benefits of the low interest rate that you locked in at the start of your loan.
Finally, a low monthly payment is another key benefit to use a 30-year fixed-rate mortgage loan. You could end up with a smaller monthly payment, compared to a loan with a shorter repayment term. By spreading the payments out over a longer period of time, you are effectively reducing the size of your monthly payments.
Learn more about the advantages of a USDA loan, a Conventional Fixed Rate loan and working with your local community bank. Talk to one of our mortgage loan experts at Chelsea State Bank. Contact our office by phone: 734-475-4210 or online.
